One of China’s largest overseas buyers just had its operations seized by the government. The China Insurance Regulatory Commission (CIRC), a state run regulator, has officially begun prosecution of Wu Xiaohui, the former CEO of Anbang. The process has led the government to seize control of the assets “temporarily,” placing billions of dollars of Canadian real estate in the hands of the Chinese government. Oh yeah, and the Chinese government may be deciding which assets need to be liquidated.
CEO Prosecuted, Company Control Seized by The Government
Early this morning, the CIRC announced that Wu would be prosecuted on suspicion of “economic crimes.” CIRC will takeover the company for a period of at least one year, to “protect” Anbang’s consumers. This builds on a previously announced strategy, where the government formed committees to “resolve risks at a few problem companies in an orderly and controllable manner.” The regulator notes that the company is “basically stable.” At least one buyer is already in talks to bid for some of Anbang’s assets.
Double Counting Capital Reserves Is bad, Right?
Anbang may have been using a significant amount of leverage, that wasn’t clear when they made the purchases. Caixan, a major Chinese financial news site, attempted to demystify Anbang’s shareholder structure. In the process, they came across this:
Clear as mud, right? While investigating the company, they found that there may be significant cross investment pledges. Consequently, capital reserves may have been counted more than once. This would mean they were likely overleveraged. Reporters from The New York Times also did a similar investigation, and also struggled to explain Anbang’s ownership structure. The hunt led them to remote villages in China, where multi-billion dollar holding companies, were located in tiny backroom office spaces.
The Chinese government wasn’t exactly thrilled with the international attention, and cracked down swiftly. On June 2, it was rumored that Chairman Wu was barred from leaving the country. It was disputed that there was a problem, but regulators are now convinced it’s definitely a problem.
What They Own In Canada
If you missed media attention around their shopping spree, here’s what they bought in Canada. The Bentall Centre, a landmark office complex in Vancouver, that went for just over a B. Retirement Concepts, a senior care company in BC and Alberta, that also just happens to have a massive real estate footprint. The HSBC Building in Toronto, also known as 70 York Street. Last but not least, 777 Bay Street, who’s largest client is the Government of Ontario. All of these deals were approved by the Canadian government, who found nothing weird about their ownership structure.
Canada must have missed when US Congress flat out called them a state owned entity. The US never presented hard proof of the Chinese government’s involvement with Anbang. Although it’s now, ironically, under state control. It’s not like the RCMP and CSIS warned us this would happen though. Oh wait, there was that one time the RCMP and CSIS warned us this would happen. Whoops!
Update: Canderel, the owners of 777 Bay Street, reached out to dispute Brookfield’s report. They claim Anbang did not buy the building from them. Canderel appears to operate Anbang’s 70 York Street, and the Bentall Centre. Canderel’s VP of Leasing, Michael Vilner declined to answer any further questions related to Anbang at this time.
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Photo: Julien Gong Min.
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So…. were they mainly in commercial real estate or was there a good chuck of residential real estate in their holdings as well?
(Asking for a friend)
Well who knows…. Because the owners of half of vancouvers luxury real estate are unknown…..
we should get better Chinese food now!
No! The food won’t improve but I hear the quality of the little pieces of paper inside the “Fortune Cookies” will be upgraded.
Yeah, right. We will start seeing fortunes like “When you entered this restaurant it was owned by a Canadian….”
how bout, i just bbqd your cat
Recent news coming to light should make it clear that where people live (homes) should be “off the table” as speculative investment options. Foreign investment is okay, but investment money can find productive investments like businesses that grow the economy in a way that can be sustained, rather than asset bubbles. Landbanking and Assignment/House flipping should be discouraged. Good to hear BC has made a good start, and hopefully Ontario will follow.
This is a fun game. It’s not like the Chinese government wants strategic government buildings for spying! Oh WAIT!
“China “gifted” the African Union a headquarters building and then allegedly bugged it for state secrets”
…Ontario government at 777 Bay St…
Is the described potential purchaser of these assets purchases them from the temporary ownership by the government of China below market value does this mean that the government of China has subsidized the acquisition of key commercial assets? A bang was also trying to buy Vancouver airport. It is not a loose jump to say this sweep by a foreign government of key assets is similar to a form of colonization.
This is important to remember. There’s a reason Donald Trump has been mentioning the Panama Canal all of a sudden. It’s considered a strategic purchase from a company closely related to the Chinese government.
Colonialism is still alive and kicking. People just don’t get angry about it, since what’s the big deal if we switch out one ruler for another?
This story may end up being a good proxy for what will come out when the surface is scratched looking into foreign money speculating on Tor/Van residential real estate. All kinds of shady stuff.
It’s hard to believe that Canada was/is willing to sell its reputation so willingly.
Woot! See boys I was right…Xi is getting his cizash bizack bitches…pimp slap!
Well done. I vote we build a little 779 shack -size replica next to 777 Bay, and then swap the address plates.
Quickly please LOL
I don’t get it. Why the author was so obsessed that Anyang is a state owned entity? In Canada, we called it crown corporation, right? And if any bank or credit union or insurance was under scrutiny of OSFI, the company would be temp controlled by OSFI or other government agency, right? I mean it’s bad for the shareholder and creditor, but why do you have to drag out the BS of state owned entity? Uneducated investor and politician rant about it, okay fine, I understand, but arent you guys supposed to be financial professional?
In Canada, state owned companies like Via Rail and the CMHC openly declare that’s what they are. There’s no question about it, and that makes them ineligible to say, buy a building or business that would operate with sensitive information. CMCH couldn’t just set up a bank in the US, or Via Rail couldn’t just buy a building housing a department of the US government. It would be denied outright.
Anbang is NOT a state owned entity. Consequently, it was not subject to the rules of a state run enterprise. It bought buildings that house information, that legally can’t be extended beyond our borders. They would NOT have been approved if it was say, the PBoC or the China Construction Bank. The private company was seized by the Chinese government, after making these buys. Giving the Chinese government a possible loophole of entry.
The big problem is that the US government has been denying them rights that a regular company would have, because they alleged state ties were so close. The US government could not determine where the money was coming from, or who owns it. That made them ineligible to buy a number of things. In Canada, we didn’t even look that deep to determine how clear the ownership was. I think it only took us two weeks to clear them, which is clear we didn’t do any digging.
This is colonialism, not business. Don’t get the two confused. It just happens to have a lot of money and real estate involved.
The problem is NOT that it IS/WAS a state owned entity, the problem is that it NOW has BECOME one. An SEO that now owns a large portfolio of Canadian property, including retirement homes, and space used by the Ontario Government.
Its not like the LCBO or the TTC buying up retirement homes in Mexico. Its like Warren Buffet and Berkshire buying up retirement homes in Mexico and then handing them over the US government. Mexico might have felt differently about approving such sales if they knew this ahead of time. Also, while we do have Crown Corps in the insurance field, they stay in that field. They do not all of sudden expand their “expertise” into large sports and entertainment industries, or large oversees acquisitions.
Comparing foreign SOEs to Canadian Crown corps is disingenuous in the extreme. SOEs may have motives other than profit. Meaning they may have an incentive to sell what they produce at below-market prices back to their home country – because profit in an SOE isn’t always the primary goal. That in itself is a very good reason to prevent SOEs from making direct investments in Canada the way we allow private companies to do. A Canadian Crown corporation, on the other hand, would presumably have goals that are in the national interest (otherwise why have a Crown corp at all).
Warning !! A wrap you head in tinfoil theory ahead –
IF Anbang also happened to own a large Canadian residential RE portfolio (through hidden identities, shell companies etc) would China now potentially have the leverage over Canada to say “if you want a “softer” landing for real estate you better do X” “Otherwise we will dump everything at once and bring down your economy”
Not that another country would ever do something like that to us friendly Canadians.
Perhaps it might not be in their plans, but if Anbang owns residential real estate and the Chinese dump it just for liquidity, then we might see a crash with or without the intent.
I guess knowing who is buying up your real estate isnt such a bad idea at all. I guess we will just have to wait and see…
i agree with you on that. Canada’s housing market needs to crash to adjust
Anyone who didn’t see THIS coming just doesn’t understand China, or Xi.
It was inevitable.
And there is much, much more to come.
It is pure Marxism – let Capitalism develop the means of production, then nationalize it.
Those who do think China has turned into a Capitalist government, does so at their own peril.
Those who have forgotten the main tenants of Marxism, do so at their own peril.
‘How to solve a debt crisis Chinese Style, 101’.
Here’s a clue.
I have this picture in my head of Christy Clark and Gregor Roberson groveling on their hands and knees, scrambling to grab loose bills that a Communist Oligarch is spraying into the air around them.
It is refreshing to see the apparent lack of blind greed being displayed by Carol James and David Eby. Let’s hope they can help us find a path out of this mess. We need federal government involvement too, with a big push towards transparency and meaningful capital gains taxation for non-residents.
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